Orbis Gold shareholders should be scratching their heads in disbelief at the deal directors have struck with Canadian-listed SEMAFO
Orbis Gold shareholders should be scratching their heads in disbelief at the deal directors have struck with Canadian-listed SEMAFO. In October 2014, SEMAFO foreshadowed a bid for the shares of ASX-listed Orbis Gold at a price equivalent to US$143 million. Directors advised shareholders to refuse such a low price. The principal asset of Orbis is the Natougou gold deposit in Burkina Faso which the company has valued at US$533 million. On Wednesday, the same directors recommended a new deal pricing the company at US$137 million. That's US$5 million less! Due to currency fluctuations, the Australian dollar share price is 9.7% higher but Australian gold sector equity prices have risen 29%. Putting aside the dubious negotiating skills of the Orbis directors, there is a more general issue illustrated by these events. Natougou was never worth $533 million. This amount was another example of an exaggerated valuation, usually using highly favourable and unrealistically low discount rates, being used as bait for investors.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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